All eyes on Brazil as Indian coffee prices dip

It was a dip that caught everyone off-guard. “We were taken by surprise,” says Marvin Rodrigues, managing director of J Rodrigues Coffee, discussing the rapid slide in international coffee prices, which hit a year’s low in February. Rodrigues is a third-generation coffee cultivator and he and his family now cultivate 600 acres of coffee in plantations in Karnataka, the biggest coffee-producing state in India. Like others in the state, harvesting on Rodrigues’s plantation was completed in February and March, which was when the prices fell, and he ended up selling part of his robusta crop at prices 30 per cent lower than the previous year.

Reports of agrarian distress have been coming in from different parts of the country, the bulk of it caused byunseasonal rain and hail. According to ministry of agriculture data released last month, 189.8 lakh hectares have been affected by rain and hailstorm. But unlike the crops affected by the vagaries of the weather in India, the crash in the prices of coffee was caused by global factors.

Three months ago, coffee prices hit their lowest level in a year when prices fell to 128.75 cents a pound from a high of 180 cents a pound in October and November last year. Prices were pushed down primarily by the weakening of the Brazilian real, increasing coffee exports from the biggest coffee producer, and mild rains that increased the prospect of a larger crop than expected. Hedge funds, too, began taking bearish positions, driving down prices.